Tuesday, June 10, 2014

When applying for large loans, it can be tricky convincing a lender to give the green light. At the very least, they need to be sure that the loan will be repaid without a hitch, but when low credit scores are involved, even that point can be hard to get across. Thankfully, there is a solution to this problem, with the chances quite good of getting even a $20,000 unsecured loan with bad credit.

We can understand why this may all look so strange. Logic dictates that applicants with a bad credit history cannot be counted on to repay loans when the repayment sums are high. Large loans, therefore, are too much of a risk. But securing loan approval is still possible because credit scores are not all they seem.

Even the fact that no security is offered cannot kill off the chances of approval, but it is important to accept that the terms with a large unsecured loan are never going to be ideal. So, how can the green light be assured? There are 3 key things to do.

Concentrate on Factors That Matter

Fretting over credit scores is pointless. They have a modest influence on a loan application - even for a $20,000 unsecured loan with bad credit - but are not enough to dictate the final decision. Scores only decide the interest rate charged, which can affect affordability but not to a great degree

By concentrating on the principal factors, it is possible to put together a very strong application. These relate to employment status and to the influence of existing debt, though the debt-to-income ratio. Trust us, securing loan approval is much more likely when these factors are addressed first.

Applicants need to be in full-time employment, and have held their job for a minimum of 6 months before the submission date. However, the debt-to-income ratio confirms what is affordable. It stipulates only 40% of income can be committed to repaying debts each month. So, the repayment on a new loan cannot push the percentage figure over 40%. With a large unsecured loan, it may be difficult to stick within this limit.

Offer Some Backup

A far as lenders are concerned, receiving the monthly repayments is the only thing that really matters. So, if repayments can be guaranteed, then the issue of getting a $20,000 unsecured loan with bad credit becomes moot.

By offering a backup to meet the required repayments, the obligation is guaranteed and the risk of default is basically removed. This then makes securing loan approval a formality. In this case, the guarantee is provided by a cosigner, someone who promises to make the repayments in the event the borrower is unable to.

For the lender to accept the cosigner, however, he or she must have an excellent credit record, and a large enough income to meet the repayments - in the event it becomes necessary. It is the best option for large unsecured loans, where security through collateral is not provided.

Choosing A Lender

Even when the aspects mentioned above are all in order, and the application for a $20,000 unsecured loan with bad credit looks strong, approval is far from assured. Traditional lenders, like banks, have lending policies they rarely stray from, and these policies include the rejection of bad credit borrowers.

Usually, borrowers with scores lower than 600 are prime candidates for rejection, but online lenders are more open to accommodating bad credit borrowers with even lower scores. As experts in bad credit lending, securing loan approval with them is much more likely.

Spending time searching online can pay off, with the best deals there to be found. Comparison sites make the task easier still, but remember to check out their reputations before borrowing any large unsecured loans.